Home flipping shot up in 2015, with 179,778 U.S. single family homes and condos flipped, 5.5 percent of all single family home and condo sales during the year, according to the recently released RealtyTrac® Year-End and Q4 2015 U.S. Home Flipping Report.
The 5.5 percent share of U.S. home flips in 2015 was up from a 5.3 percent share in 2014, marking the first annual increase in the share of homes flipped following four consecutive years of decreases. The share of homes flipped in 2015 increased from the previous year in 83 of 110 U.S. metropolitan statistical areas nationwide analyzed for the report (75 percent).
“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” says Daren Blomquist, senior vice president at RealtyTrac. “Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year. The total number of investors who completed at least one flip in 2015 was at the highest level since 2007, and the number of flips per investor was at the lowest level since 2008.”
There were 110,008 investors or entities that completed at least one home flip in 2015, the highest number of home flippers since 2007, when there were 130,603 home flippers. The peak in the number of active home flippers was in 2005, with 259,192. There were 1.63 home flips per investor in 2015, the lowest ratio of flips per investor since 2008.
“More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicates that flippers in 2015 continued to operate within relatively conservative margins,” Blomquist continues. “Homes flipped in 2015 were on average purchased at a 26 percent discount below estimated market value and re-sold by the flipper at a 5 percent premium above estimated market value.”
Share of homes flipped in 2015 above 2005 levels in 11 percent of markets
The 5.5 percent share of U.S. homes flipped in 2015 was still well below the peak of 8.2 percent of U.S. homes flipped in 2005.
Counter to the national trend, the share of homes flipped in 2015 was above 2005 levels in 12 of the 110 metro areas (11 percent) analyzed in the report, including Pittsburgh (19 percent above 2005 levels); Memphis (18 percent above 2005 levels); Buffalo, N.Y. (12 percent above 2005 levels); San Diego (4 percent above 2005 levels); Seattle (4 percent above 2005 levels); Birmingham, Ala. (4 percent above 2005 levels); and Cleveland (3 percent above 2005 levels).
Metro areas with the biggest year-over-year increase in share of flips were Lakeland, Fla. (up 50 percent); New Haven, Conn. (up 45 percent); Jacksonville, Fla. (up 41 percent); Homosassa Springs, Fla. (up 40 percent); and Akron, Ohio (up 37 percent).
The Miami metro area had the most homes flipped of any market nationwide in 2015, with 10,658, representing 8.6 percent of all Miami-area home sales for the year and up 4 percent as a share of all sales from 2014.
Average gross flipping profit at a 10-year high in 2015
Homes flipped in 2015 yielded an average gross profit of $55,000 nationwide, the highest average gross profit for homes flipped nationwide since 2005, when the average gross profit on flipped homes was $58,750. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping experts estimate typically run between 20 percent and 33 percent of the property’s after repair value).
The average gross flipping profit of $55,000 in 2015 represented an average gross return on investment (ROI) of 45.8 percent, up from 44.2 percent in 2014 and up from a 35.3 percent in 2005. The annual peak in average gross flipping ROI was 2013 at 46.0 percent. The average gross ROI is the gross profit expressed as a percentage of the original purchase price.
Markets with highest average gross flipping profits, ROI and increase in ROI
Among 110 metro areas with at least 250 flips in 2015, those with the highest average gross flipping profit in dollars in 2015 were San Francisco ($145,000); San Jose, Calif. ($145,000); New York ($120,000); Los Angeles ($115,000); and Oxnard-Thousand Oaks-Ventura, Calif. (110,000).
Markets with the highest average gross ROI on homes flipped in 2015 were Pittsburgh (129.5 percent); New Orleans (99.2 percent); Philadelphia (98.4 percent); Cincinnati (89.7 percent); and New Haven, Conn. (89.6 percent).
Markets with the biggest increase in average flipping gross ROI in 2015 compared to 2014 were Boise, Idaho (85 percent increase); Hartford, Conn. (51 percent increase); Ocala, Fla. (49 percent increase); Homosassa Springs, Fla. (41 percent increase); and Huntsville, Ala. (39 percent increase).
Highest share of home flips in Nevada, Florida, Alabama, Arizona and Tennessee
States with the highest share of flips in 2015 were Nevada (8.8 percent); Florida (8.0 percent); Alabama (7.4 percent); Arizona (7.1 percent); and Tennessee (6.9 percent).
Among states with at least 1,000 single family homes flipped in 2015, those with the biggest year-over-year increase in share of flips were Connecticut (up 23 percent); Oregon (up 21 percent); Maryland (up 19 percent); Illinois (up 18 percent); and New Jersey (up 17 percent).
Among 110 metro areas with at least 250 flips in 2015, those with the highest share of flipping as a percentage of all single family home sales were Memphis (11.1 percent); Fresno, Calif. (9.2 percent); Las Vegas (9.2 percent); Tampa (9.2 percent); and Deltona-Daytona Beach-Ormond Beach, Fla. (9.1 percent).
For more information, visit www.realtytrac.com.
